How does my deal compare to what you're currently underwriting?
Hey Everyone – Recently executed a PSA to acquire a Marriott hotel and am looking for some feedback from the institutional folks on here on how it stacks up return wise versus what you all are currently underwriting (hotel or any other real estate asset class).
For context, I’m just helping my family execute an exchange as we recently sold a building, so I don’ for a living, but do have general PE experience. Also, our family currently owns hotels and other asset types so we understand and are comfortable with hotels.
Total PP inclusive of all fees/renovation estimates is ~$40m, is ~$3.3m so entry cap is ~ 8.2%. Loans are coming in around 63% LTV at ~7.2%. Assuming NOI holds at $3.3 in early years we’ll get about an 8% annual coupon. If we can grow NOI 5% per year for 5 years and sell at the same ’s a ~2.0x MoM. There are no promotes or anything so the gross returns go to us.
These rough returns are a little below what we targeted in prior years, mostly driven down by borrowing costs, but we have an exchange so the tax benefits significantly outweigh not doing a deal rn.
Appreciate your feedback!